ATLANTA, October 24, 2007 -- RPC, Inc. (NYSE: RES) today announced its unaudited results for the third quarter ended September 30, 2007. RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets.
For the quarter ended September 30, 2007, revenues increased 5.0 percent to $161,961,000 compared to $154,209,000 in the third quarter last year. Operating profit for the quarter was $24,663,000 compared to $46,625,000 in the prior year. Net income was $14,893,000 or $0.15 diluted earnings per share, compared to $28,770,000 or $0.29 diluted earnings per share last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $45,709,000 compared to $58,517,000 in the prior year.
RPC's revenues increased during the quarter compared to the prior year due to stable industry activity levels and our increased capacity of revenue-producing equipment, offset by increased competition which has impacted equipment utilization and pricing.
Cost of services rendered and goods sold was $91,431,000, or 56.5 percent of revenues, during the third quarter of 2007, compared to $74,011,000, or 48.0 percent of revenues, in the prior year. The increase in these costs was due to the variable nature of many of these expenses, including compensation, materials and supplies, maintenance and repairs, and fuel, partially offset by decreased equipment rental expense. As a percentage of revenues, cost of services rendered and goods sold also increased because of upward cost pressure for certain materials and supplies and personnel, coupled with lower average utilization of equipment and personnel, and lower pricing for services.
Selling, general and administrative expenses increased by 12.1 percent in the third quarter of 2007 to $26,327,000 from $23,480,000 in the prior year. This increase was due primarily to higher compensation and other operational expenses associated with new operational locations. As a percentage of revenues, these costs were 16.3 percent in 2007 compared to 15.2 percent last year. Depreciation and amortization were $20,846,000 during the quarter, compared to $11,572,000 last year, due to the capital expenditures made during recent quarters under RPC's long-term growth plan.
For the nine months ended September 30, 2007, revenues increased 15.5 percent to $504,037,000 compared to $436,298,000 last year. Net income decreased 17.9 percent to $66,753,000, or $0.68 diluted earnings per share compared to net income of $81,284,000, or $0.82 diluted earnings per share last year.
"RPC realized a small increase in third quarter revenues compared to the prior year, principally due to the increase in revenue-producing equipment placed in service under our long-term growth plan," stated Richard A. Hubbell, RPC's President and Chief Executive Officer. "The average domestic rig count during the third quarter was 1,789, which is 4.0 percent higher than the same period in 2006. The average price of oil increased 7.9 percent and the average price of natural gas increased by 3.5 percent during the quarter compared to the prior year.
Hubbell continued, "We are well into the implementation of our long-term growth plan, and invested almost $64 million in new equipment during the quarter. At this point, we have taken delivery of much of the equipment that we have ordered under this plan. Some equipment is not fully operational because of delays in delivery of supporting ancillary equipment that supports its operation. Our third quarter results reflect continued lower pricing for our services compared to last year. In addition, the utilization of our new equipment is climbing to normalized levels much more slowly than expected, due to increased competition for many of our services from recent new entrants into the oilfield services business, and expansion by existing competitors. Lower pricing and utilization contributed to our decreased operating margins.
"We are responding to this market dynamic by increasing our sales and marketing capabilities, continuing to focus on the operational execution of our growth plan, especially in our new locations in Arkansas and Colorado, and managing expenses and pricing to the best of our ability," concluded Hubbell. "We believe very strongly in the long term fundamentals of our business and our growth plan, and we expect to continue generating attractive returns on our invested capital."
Summary of Segment Operating Performance
RPC's business segments are Technical Services and Support Services.
Technical Services includes RPC's oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer's well. These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues. The Technical Services segment includes pressure pumping, hydraulic workover services, coiled tubing, nitrogen, downhole tools, surface pressure control equipment, well control, and fishing tool operations.
Support Services includes RPC's oilfield service lines that provide equipment for customer use or services to assist customer operations. The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.
Both Technical Services and Support Services experienced some revenue growth due to the increased drilling rig count and higher capacity of revenue-producing equipment. Technical Services revenues rose 5.4 percent for the quarter compared to the prior year. Support Services revenues rose by 3.3 percent during the quarter compared to the prior year.
RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest and Rocky Mountain regions, and in selected international markets. RPC's investor website can be found at www.rpc.net.
Certain statements and information included in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements regarding RPC's belief in the long-term fundamentals of RPC's business and growth plan, and RPC's expectation to continue to generate attractive returns on invested capital. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Such risks include the possibility of declines in the price of oil and natural gas, which tend to result in a decrease in drilling activity and therefore a decline in the demand for our services, the actions of the OPEC cartel, the ultimate impact of current and potential political unrest and armed conflict in the oil-producing regions of the world, which could impact drilling activity, adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico, competition in the oil and gas industry, and risks of international operations. Additional discussion of factors that could cause the actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in RPC's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2006.
For information about RPC, Inc., please contact:
Ben M. Palmer
Chief Financial Officer
404.321.2140
irdept@rpc.net
Jim Landers
V.P. Corporate Finance
404.321.2162
jlanders@rpc.net
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